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VR’s Eastern Promise: the growth of virtual reality in the Far East

Virtual reality (VR) is on course to become one of the next major global markets. According to the 2017 VR Industry report by Greenlight Insights, VR is expected to generate a total global revenue of $74.8 billion by the year 2021—to put it in context, that’s already two thirds the size of the entire 50-year-old global gaming industry.

While to this point it’s Western adoption of technologies like Google Cardboard and Facebook-owned Oculus that are perceived to have driven VR adoption, the growth that will propel the industry forward over the next few years could well come from the Far East.

Nintendo could be key

China looks set to be the biggest disrupter, with revenues within the country due to expand to $11.3 billion by 2021, according to Greenlight. As the biggest consumer marketplace in the world—and the potential to become the largest VR market—domestic investment in the sector has skyrocketed. And Chinese start-ups, the government and local academic centres have all began to explore ways to latch on to this burgeoning interest.

Perhaps unsurprisingly, considering its rich gaming heritage, Japan is also a key area of growth. And one of the country’s most famous technology exports, Nintendo, is rumoured to be developing a VR device compatible with its blockbuster Switch games console. While Sony’s PlayStation entered the fray with a headset last year, and while Oculus is compatible with Microsoft’s Xbox, Nintendo has a history of market innovation and could be key to bringing VR to the masses.

Until that happens, however, it’s location-based VR entertainment (LBVRE) that has captured imaginations in the Far East. A low-cost way for consumers to experience VR without stumping up for all the kit themselves, LBVRE is gaining popularity through arcade-style experiences as well as bigger installations at theme parks.

Location-based virtual reality bridges the gap

Through mixed reality arcades or VR rollercoaster rides—something first introduced by UK attraction Alton Towers—people can enjoy immersive experiences that they wouldn’t necessarily be able to afford for their own home. In China, for example, LBVRE has grown rapidly and now represents 7% of the total VR market—and it’s expected to generate $750m in revenue by 2021.

While VR arcades have suffered a bumpy ride in the US, with businesses like the Immersion Arcade in Illinois forced to close their doors already, companies like Leke VR—which provides professional solutions for China’s multitude of VR arcades—are leading the charge in the Far East. Leke’s VRLe platform has become the largest VR location-based content distribution platform in the world, and at the end of 2016 the firm began a strategic partnership with HTC Vive. With Facebook banned in China, Oculus on the other hand may struggle to get off the ground.

A Western import will be China’s first VOID theme park—a physical environment where players wear headsets and connected vests to explore in three dimensions. VOID opened its doors in Utah, USA, last summer and plans are in place to bring something similar to the Far East. Hasbro is also launching a VR centre in Shanghai, based on the hugely popular Transformers franchise.

According to Greenlight’s VR report, Japanese gamers have long been hesitant to adopt powerful gaming PCs, preferring the console experience, and here too a taste for LBVRE has developed. Internet cafes, karaoke bars and even shopping centres have all become hotspots for location-based VR, while giant specialist VR centres—like the 3,600m2 “VR Zone” in Shinjuku, recently opened by Japanese arcade company Bandai Namco Entertainment—are also proving popular.

VR—and AR—means business

But it’s not only in gaming where VR is finding its feet. Japanese real estate companies have begun using VR to provide remote tours of new homes, while architects are creating virtual builds for stakeholders to review before projects commence.

Augmented reality (AR) is also taking hold in the business world. Last year, Japan Airlines developed two proof-of-concept programs for Microsoft’s HoloLens—the first to aid training for engine mechanics, and the second for flight crew members wanting to upskill to co-pilot status.

AR adoption is likely to increase further with the release of Apple’s ARkit and Google’s ARCore.

Global growth

VR is not without its problems, and research from Hubei Century Network Technology found that just 26% of VR arcade shops in China were turning a profit. But continued growth from the Far East—especially in LBVRE—will doubtless be a boon to the global VR market.

The Japanese VR start-up scene is thriving to such an extent that companies from other areas are entering the sector to reap the rewards. Mobile games company Gumi has created its own VR start-up incubator, and has made a series of acquisitions that it believes will help it successfully break into the market. Meanwhile, several middleware companies—such as InstaVR and CRI Middleware—have sprung up to facilitate the creation of VR content by smaller publishers.

The VR market is far from maturity, and sophisticated, user-friendly experiences remain a rarity in the home. But the market’s predicted growth in the coming years, fuelled in part by its popularity in the Far East, suggests VR is about to come of age.